Question 1

You turn to the Treasury bond market page of a newspaper and look under the column headed "Ask" and see that it says,"128:16" this indicates that

Accepted Answer

A)  the price that the buyer is willing to pay for this bond is $128.16. 
B)  the price that the buyer is willing to pay for this bond is $1,280.16. 
C)  the price that the seller is willing to sell this bond for is $1,285. 
D)  the price that the seller is willing to sell this bond for is $128.16. 
A)  the price that the buyer is willing to pay for this bond is $128.16. 
B)  the price that the buyer is willing to pay for this bond is $1,280.16. 
C)  the price that the seller is willing to sell this bond for is $1,285. 
D)  the price that the seller is willing to sell this bond for is $128.16.

Question 2

Which of the following is false?

Accepted Answer

A)  Another term for a Treasury bill is a T-bill. 
B)  Treasury notes mature in 2 to 10 years. 
C)  Treasury bonds are considered very safe investments, but Treasury bills are considered to be a more risky investment. 
D)  It is unlikely the federal government will default on its bond obligations. 
A)  Another term for a Treasury bill is a T-bill. 
B)  Treasury notes mature in 2 to 10 years. 
C)  Treasury bonds are considered very safe investments, but Treasury bills are considered to be a more risky investment. 
D)  It is unlikely the federal government will default on its bond obligations.

Question 3

Which of the following is false?

Accepted Answer

A)  The issuer of a bond is a borrower. 
B)  The person who buys a bond is a lender. 
C)  Interest earned on corporate bonds is exempt from federal income taxes. 
D)  The coupon rate on a bond is the percentage of the face value that the bondholder receives annually until the bond matures. 
A)  The issuer of a bond is a borrower. 
B)  The person who buys a bond is a lender. 
C)  Interest earned on corporate bonds is exempt from federal income taxes. 
D)  The coupon rate on a bond is the percentage of the face value that the bondholder receives annually until the bond matures.

Question 4

Exhibit 38-2
  
-Refer to Exhibit 38-2. If the closing price of Dasher's stock on the previous day was $17.50,what value goes in blank (A)?

Accepted Answer

A)  -0.50 
B)  +0.50 
C)  -0.25 
D)  -0.75 
E)  There is not enough information given to answer this question. 
A)  -0.50 
B)  +0.50 
C)  -0.25 
D)  -0.75 
E)  There is not enough information given to answer this question.

Question 5

Exhibit 38-1
  
-Refer to Exhibit 38-1.The coupon rate for bond D is

Accepted Answer

A)  7 percent. 
B)  6.3 percent. 
C)  3 percent. 
D)  0.07 percent. 
E)  none of the above 
A)  7 percent. 
B)  6.3 percent. 
C)  3 percent. 
D)  0.07 percent. 
E)  none of the above

Question 6

Exhibit 38-1
  
-Refer to Exhibit 38-1.For which bond is the yield and the coupon rate the same?

Accepted Answer

A)  Bond A 
B)  Bond B 
C)  Bond C 
D)  Bond D 
E)  Bond E 
A)  Bond A 
B)  Bond B 
C)  Bond C 
D)  Bond D 
E)  Bond E

Question 7

A call option is a contract

Accepted Answer

A)  that gives the owner the right, but not the obligation, to buy shares of a stock at a specified price within the time limits of the contract. 
B)  that gives the owner the right, but not the obligation, to sell shares of a stock at a specified price within the time limits of the contract. 
C)  in which the seller agrees to provide a particular good to the buyer on a specified future date at an agreed-upon price. 
D)  that gives the owner the right, but not the obligation, to buy or sell shares of a stock at a specified price within the time limits of the contract. 
A)  that gives the owner the right, but not the obligation, to buy shares of a stock at a specified price within the time limits of the contract. 
B)  that gives the owner the right, but not the obligation, to sell shares of a stock at a specified price within the time limits of the contract. 
C)  in which the seller agrees to provide a particular good to the buyer on a specified future date at an agreed-upon price. 
D)  that gives the owner the right, but not the obligation, to buy or sell shares of a stock at a specified price within the time limits of the contract.

Question 8

In reading the stock market quotes in the newspaper,the column with the heading "Ticker" gives the

Accepted Answer

A)  number of shares of the stock traded that day. 
B)  the full name of the company whose stock is being studied. 
C)  stock symbol for the company. 
D)  highest price the stock has sold for in the past year. 
A)  number of shares of the stock traded that day. 
B)  the full name of the company whose stock is being studied. 
C)  stock symbol for the company. 
D)  highest price the stock has sold for in the past year.

Question 9

The typical face value of a corporate bond is $1,000.

Accepted Answer

A) True 
 B)False

Question 10

Exhibit 38-1
  
-Refer to Exhibit 38-1.The coupon rate for bond B is

Accepted Answer

A)  0.17 percent. 
B)  16.7 percent. 
C)  0.15 percent. 
D)  17 percent. 
E)  none of the above 
A)  0.17 percent. 
B)  16.7 percent. 
C)  0.15 percent. 
D)  17 percent. 
E)  none of the above

Question 11

Exhibit 38-4
  
-Refer to Exhibit 38-4. If the closing price of Brown,Inc.'s stock on the previous day was $43.10,what value goes in blank (A)?

Accepted Answer

A)  -1.00 
B)  +1.00 
C)  -0.50 
D)  +0.50 
E)  There is not enough information given to answer this question. 
A)  -1.00 
B)  +1.00 
C)  -0.50 
D)  +0.50 
E)  There is not enough information given to answer this question.

Question 12

Today,the Dow Jones Industrial Average

Accepted Answer

A)  consists of 30 stocks. 
B)  is a set group of stocks that remains constant over time. 
C)  contains stocks that are widely held by institutional investors and individuals. 
D)  contains both stocks and bonds of large American companies. 
E)  a and c 
A)  consists of 30 stocks. 
B)  is a set group of stocks that remains constant over time. 
C)  contains stocks that are widely held by institutional investors and individuals. 
D)  contains both stocks and bonds of large American companies. 
E)  a and c

Question 13

If the coupon payment on a bond is $640 and the coupon rate is 6%,then what is the price of the bond?

Accepted Answer

A)  $10,667 
B)  $10,000 
C)  $1,067 
D)  $678.40 
E)  There is not enough information provided to answer this question. 
A)  $10,667 
B)  $10,000 
C)  $1,067 
D)  $678.40 
E)  There is not enough information provided to answer this question.

Question 14

Applied to any investment,the phrase "there's no such thing as a free lunch" means that higher returns come with lower risks,and lower returns come with higher risks.

Accepted Answer

A) True 
 B)False

Question 15

A bear market is one in which prices are expected to rise.

Accepted Answer

A) True 
 B)False

Question 16

The coupon rate is equal to the annual coupon payment

Accepted Answer

A)  divided by the face value of the bond. 
B)  divided by the price paid for the bond. 
C)  multiplied by the price paid for the bond. 
D)  divided by the current market value of the bond. 
A)  divided by the face value of the bond. 
B)  divided by the price paid for the bond. 
C)  multiplied by the price paid for the bond. 
D)  divided by the current market value of the bond.

Question 17

Which of the following is false?

Accepted Answer

A)  Even if a corporation is not currently issuing bonds, you could still buy a bond directly from the corporation. 
B)  Bonds that are rated AAA from Standard and Poor's have received the highest rating possible. 
C)  A bond that is rated in the D category indicates that the bond issuer cannot pay off the bond. 
D)  It is possible to buy a bond from someone who purchased and still holds the bond he bought from the corporation at an earlier date. 
A)  Even if a corporation is not currently issuing bonds, you could still buy a bond directly from the corporation. 
B)  Bonds that are rated AAA from Standard and Poor's have received the highest rating possible. 
C)  A bond that is rated in the D category indicates that the bond issuer cannot pay off the bond. 
D)  It is possible to buy a bond from someone who purchased and still holds the bond he bought from the corporation at an earlier date.

Question 18

If you thought the share price of a stock was going to rise,would you be more likely to buy a call option or a put option?

Accepted Answer

A)  a call option 
B)  a put option 
C)  a call option and a put option 
D)  There is not enough information given to answer this question. 
A)  a call option 
B)  a put option 
C)  a call option and a put option 
D)  There is not enough information given to answer this question.

Question 19

Jessica paid $7,000 for a bond with a face value of $6,000.She will be paid $400 annually as long as she holds on to the bond,until the bond's maturity date.The yield on the bond is

Accepted Answer

A)  6.67 percent. 
B)  5.71 percent. 
C)  15.0 percent. 
D)  80.0 percent. 
A)  6.67 percent. 
B)  5.71 percent. 
C)  15.0 percent. 
D)  80.0 percent.

Question 20

Which of the following is false?

Accepted Answer

A)  The Treasury bond information published under the column heading "Yield" is based on the ask price of the bond. 
B)  The Treasury bond information published under the column heading "Yield" is based on the assumption that the bond is held to maturity. 
C)  The Treasury bond information published under the column heading "Bid" indicates the price a buyer will pay if he buys the bond. 
D)  The Treasury bond information published under the column heading "Bid" is the price a buyer will receive if she sells the bond. 
A)  The Treasury bond information published under the column heading "Yield" is based on the ask price of the bond. 
B)  The Treasury bond information published under the column heading "Yield" is based on the assumption that the bond is held to maturity. 
C)  The Treasury bond information published under the column heading "Bid" indicates the price a buyer will pay if he buys the bond. 
D)  The Treasury bond information published under the column heading "Bid" is the price a buyer will receive if she sells the bond.

Exam 38: Stocks, Bonds, Futures, and Options

You turn to the Treasury bond market page of a newspaper and look under the column headed "Ask" and see that it says,"128:16" this indicates that

Which of the following is false?

Which of the following is false?

Exhibit 38-2 -Refer to Exhibit 38-2. If the closing price of Dasher's stock on the previous day was $17.50,what value goes in blank (A)?

Exhibit 38-1 -Refer to Exhibit 38-1.The coupon rate for bond D is

Exhibit 38-1 -Refer to Exhibit 38-1.For which bond is the yield and the coupon rate the same?

A call option is a contract

In reading the stock market quotes in the newspaper,the column with the heading "Ticker" gives the

The typical face value of a corporate bond is $1,000.

Exhibit 38-1 -Refer to Exhibit 38-1.The coupon rate for bond B is

Exhibit 38-4 -Refer to Exhibit 38-4. If the closing price of Brown,Inc.'s stock on the previous day was $43.10,what value goes in blank (A)?

Today,the Dow Jones Industrial Average

If the coupon payment on a bond is $640 and the coupon rate is 6%,then what is the price of the bond?

Applied to any investment,the phrase "there's no such thing as a free lunch" means that higher returns come with lower risks,and lower returns come with higher risks.

A bear market is one in which prices are expected to rise.

The coupon rate is equal to the annual coupon payment

Which of the following is false?

If you thought the share price of a stock was going to rise,would you be more likely to buy a call option or a put option?

Jessica paid $7,000 for a bond with a face value of $6,000.She will be paid $400 annually as long as she holds on to the bond,until the bond's maturity date.The yield on the bond is

Which of the following is false?

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free, Controlled, and Relative

Supply, Demand, and Price: Applications

Macroeconomic Measurements: Prices and Unemployment

Macroeconomic Measurements: GDP and Real GDP

Aggregate Demand and Aggregate Supply

Classical Macroeconomics and the Self Regulating Economy

Keynesian Macroeconomics and Economic Instability: A Critique of the Self-Regulating Economy

Fiscal Policy and the Federal Budget

Money, Banking,and the Financial System

The Federal Reserve System

Money and the Economy

Monetary Policy

Expectations Theory and the Economy

Economic Growth: Resources, Technology, Ideas, and Institutions

The Financial Crisis of 2007-2009

Debates in Macroeconomics Over the Role and Effects of Government

Elasticity

Consumer Choice: Maximizing Utility and Behavioral Economics

Production and Costs

Perfect Competition

Monopoly

Monopolistic Competition, Oligopoly, and Game Theory

Government and Product Markets: Antitrust and Regulation

Factor Markets: With Emphasis on the Labor Market

Wages,Unions,and Labor

The Distribution of Income and Poverty

Interest, Rent, and Profit

Market Failure: Externalities, Public Goods, and Asymmetric Information

Public Choice and Special-Interest-Group Politics

Building Theories to Explain Everyday Life: From Observations to Questions to Theories to Predictions

International Trade

International Finance

Globalization and International Impacts on the Economy

The Economic Case For and Against Government: Five Topics Considered

Agriculture: Problems, Policies, and Unintended Effects

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